Passive Investment Income

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Passive Investment Income

DAILY MARKET REPORT
October 19th 2016

EUR/USD

The American dollar was among the worst performers this Tuesday, down against most of its major rivals, but the EUR. Broad dollar’s weakness was not enough for the common currency to recover ground, as investors are waiting for whatever the ECB has to offer this Thursday before risking into the pair. The Central Bank´s head, Mario Draghi, is largely expected to keep the ongoing currency unchanged and repeat that they are still in an implementation phase, but uncertainty ahead of the event will probably persists. The US released September inflation figures this Tuesday, which came in at 0.3% monthly basis and at 1.5% compared to year before, in line with market’s expectations. The core readings, without food and energy, came slightly below expected, and whilst the figures are not enough to prevent the FED from hiking next December, indeed put the greenback under further selling pressure across the board.

The EUR/USD pair, however, was unable to advance beyond its early Asian high of 1.1026, and closed the day a couple of pips below the critical 1.1000 level. The near-to-medium term outlook for pair is still bearish, and there is little in intraday charts to suggest that it may change bias any time soon. Technically, the 4 hours chart shows that the price faltered at the 23.6% retracement of the latest daily decline, measured between 1.1205 and 1.0963, at 1.1020, while falling back below a mild bearish 20 SMA. In the same chart, the Momentum indicator continues hovering below its 100 level while the RSI indicator bounced from oversold readings, but remains below its recent lows, all of which suggesting the absence of buying interest. The 38.2% retracement of the same rally converges with Thursday’s high at 1.1055, being now the level to surpass to see the pair correcting higher.

Support levels: 1.0950 1.0910 1.0860

Resistance levels: 1.1020 1.1055 1.1100

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USD/JPY

The USD/JPY pair remained confined within a tight range, temporarily surging above 104.00, but closing the day pretty much flat in the 103.80 region. There were no macroeconomic news coming from Japan, although policy makers did their usual round of jawboning. Japanese Finance Minister Aso reiterated that they are watching FX moves carefully, remarking that excessive volatility could damage the economy. The calendar in Japan will remain empty this Wednesday, although China will release first-tier data, including retail sales, and Q3 GDP readings that will likely set the tone among currencies this Wednesday. Technically, the pair is within a consolidative phase, having made little progress ever since the week started, although the upward potential seen during the past few days seems to be fading, given that the pair has set a lower low and a lower high daily basis. Also, technical indicators have entered negative territory in the 4 hours chart, and despite having limited bearish momentum, there are no signs that support and upward turn. In this last time frame, the 100 SMA advanced above the 200 SMA, both far below the current level, suggesting that in the longer run, the downward risk is limited.

Support levels: 103.70 103.30 102.95

Resistance levels: 104.10 104.40 104.90

Passive Investment Income

GBP/USD

Pound’s recovery extended this Tuesday, with the GBP/USD pair reaching a high of 1.2324 during the American afternoon and holding nearby by the end of the day. Despite political woes in the UK, the rebound may extend near term, although the underlying bearish trend remains intact in the longer one. The UK released its latest inflation figures, with headline inflation coming in at 1.0% year on year, above expectations of 0.8% and previous 0.6%. Core CPI accelerated to 1.5% year on year, above expectations of 1.4, while the Producer Price Index was up for the third consecutive month, printing 1.2% when compared to a year before, and by 0.2% monthly basis. Given the recent fall in Pound, higher inflation was no surprise, and is actually expected to hit BOE’s target of 2% in 2017. The Central Bank governor, Mark Carney, has made it clear that they are ready to accept higher inflation readings, and that it won’t result in a tightening of monetary policy. Technically, the 4 hours chart shows that the price has extended above a now modestly bullish 20 SMA, around 1.2215, while the Momentum indicator keeps heading north, despite being in overbought territory, and the RSI losses upward strength, but holds around 59, suggesting that the pair may consolidate same before extending its rally up to 1.2475, the high set after the wild slide from last October 7th.

Support levels: 1.2260 1.2220 1.2180

Resistance levels: 1.2320 1.2375 1.2430

Passive Investment Income

AUD/USD

The AUD/USD pair advanced up to 0.7689, a fresh 2-week high, supported by the good performance of worldwide stocks, and the soft tone of the American currency. In Australia, the release of the RBA’s latest Minutes showed that another interest rate cut remains possible as governor Philip Lowe said interest rates could fall if jobs market worsens, although his approach was seen as cautious to any further interest rate cut. He also referred to inflation, suggesting that, despite being below their comfort levels, it’s still not a major concern and that “what is important is that we deliver an average rate of inflation consistent with the medium-term target.” The pair retreated modestly after approaching the 0.7700 level, a major static resistance area, as it has been unable to hold on to gains above the level during these last few months. Technical readings in the 4 hours chart suggest that the pair may see a new leg higher during the upcoming sessions, as the 20 SMA has accelerated its advance, and maintains a strong upward slope below the current level, while technical indicators have turned fat within positive territory after correcting overbought conditions. The pair can go up to 0.7730, September high, where the first batch of sellers will probably surge.

Support levels: 0.7650 0.7600 0.7570

Resistance levels: 0.7690 0.7730 0.7770

Passive Investment Income

GBP/CAD

The GBP/CAD cross surged to its highest for the week, printing 1.6170 before settling around 1.6130, underpinned by Pound’s demand. The sharp comeback of the UK´s currency, however, is seen as corrective, and the risk of a u-turn is still quite high. As for the Canadian dollar, the currency was unable to advance, despite positive news, as according to official data, manufacturing sales increased 0.9% to $51.1 billion in August, reflecting higher sales of food, primary metal, and petroleum and coal products, beating expectations of a 0.3% advance. From a technical point of view and in the short term, the upside is favored, as the price is well above a now bullish 20 SMA, while technical indicators have turned flat well above their mid-lines, and after correction overbought conditions. In the 4 hours chart, technical indicators head north well above their mid-lines, whilst the price is above its 20 SMA, in line with the shorter term outlook.

Support levels: 1.5940 1.5985 1.5940

Resistance levels: 1.6055 1.6100 1.6145

Passive Investment Income

Dow Jones

Wall Street edged higher this Tuesday, with the DJIA closing the day at 18,161.94, up by 0.42%, the Nasdaq Composite up 0.85%, to 5,243,84, while the S&P added 13 points, to end at 2,139.60. US indexes found support in strong earnings reports, with Netflix adding 19.03% while Goldman Sachs rose 2.2%, as the bank’s results beat estimates. On the negative side was IMB, which ended down 2.6% after reporting its 18th straight quarter of revenue decline. Nevertheless, and given that chances of a US rate hike next December remain high, the upward potential for US equities remains limited. Technically, the daily chart for the DJIA maintains a negative tone, as the index retreated strongly from a bearish 20 DMA, while holding below the 100 DMA, and with technical indicators still within negative territory. In the 4 hours chart, the technical outlook is neutral-to-bearish, as indicators hover around their mid-lines, whilst the index is barely holding above a now flat 20 SMA.

Support levels: 18,130 18,062 18,010

Resistance levels: 18,185 18,235 18,292

Passive Investment Income

FTSE

The FTSE 100 regained the 7,000 level, closing the day at 7,000.06, up by 52 points or 0.76%, supported by a rally in base metals, which helped mining-related equities to close firmly higher. Glencore added 3.2%, while Randgold Resources advanced 2.05%. Polymetal International added 3.47%, as the metal producer said it’s on track to meet its 2015 production guidance. A stronger Pound limited gains, alongside with Burberry, as the company reported a 4% decline in underlying revenue for the first quarter, closing the day 7.21% lower. The daily chart shows that the index is barely above a bullish 20 SMA, while the Momentum indicator keeps heading lower within positive territory, and the RSI indicator bounced modestly from its 50 level, all of which suggest that the upside is limited. In the 4 hours chart, the index is unable to settle above a bearish 20 SMA, while technical indicators have lost their upward strength within neutral territory, now turning modestly lower, and suggesting the Footsie may return to its recent lows, and even decline further.

Support levels: 6,934 6,879 6,824

Resistance levels: 7,005 7,051 7,129

Passive Investment Income

Gold

Spot gold managed to advance on dollar’s weakness, although the commodity’s rally stalled below the critical Fibonacci resistance at 1,266.30, the 61.8% retracement of the May/July rally. Adding to the soft tone of the US dollar, China released some positive data during the past Asian session that underpinned metals ´prices. Credit expansion in the country advanced at a stronger pace than what economist expected, with aggregate financing up CNY1.72 trillion in September from CNY1.47 trillion in August. China will release its Q3 GDP figures, among other relevant macroeconomic figures during the upcoming Asian session, and gold’s upcoming direction will depend on it. Technically, the daily chart shows that the 20 DMA has continued declining below the 100 and 200 SMAs, all of them well above the current level, while technical indicators have began to correct from oversold readings, maintaining moderate bullish slopes within negative territory. In the 4 hours charts, technical indicators have lost upward strength but remain within positive territory, while the price has found an intraday support around a flat 20 SMA at 1,256.25.

Support levels: 1,256.25 1,246.00 1,241.35

Resistance levels: 1,266.30 1,277.05 1,283.90

Passive Investment Income

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